Chief of New German Sensor House EBS Anticipates Strong Growth, Post Airbus

As Airbus Electronics and Border Security (EBS) prepares to be bought out by US investment firm KKR, its top executive is predicting a period of powerful growth to come.

Thomas Müller, EBS CEO, said in an interview with Defense News that strategy is in line with what the German government would like to see from the company following last year's classification of the business as a "key technology" by the German Ministry of Defence.

As a result, the federal government puts great emphasis on the fact "that business will be strengthened," stressed Müller, whose company's portfolio includes radar, electronics and optronics.

As can be guessed by the name, EBS is currently part of Airbus Defence and Space. However, the Group has sold 74.9 percent of its shares to KKR, which prevailed in a bidding process over competitors from Germany and abroad.

After the completion of the transaction, which is expected by first quarter of next year at the latest, EBS will change its name to Hensoldt GmbH. Hensoldt will be one of the biggest German companies in the defense sector with around €1 billion in sales and about 4,000 employees.

KKR intends to put the company back on the market in a few years after showing increased profits, Müller said. Therefore revenues must rise significantly and profitably. He sees favorable conditions for this increase, due to the changed security situation. "The political will is there again, to invest in defense," Müller said.

The CEO sees the German market, which stands to make up about 30 percent of sales for Hensoldt, as key for the company. "I would like, if possible, to grow disproportionately in Germany," Müller said.

Domestically, he expects the frigate 124, the multipurpose fighting vessel 180, the introduction of the new air defense system TLVS/MEADS, the upgrade of the Eurofighter and the Leopard tank optronic modernization to all pay off for his company, among other business opportunities. Müller announced a rotating version for land operation of the navy radar used on the the F125 class frigates. In addition the range could be expanded by software applications. "We have enormous development potential."

Because EBS products are classified as a key technology by the federal government, the company must guarantee special security requirements. "There are some filters that ensure that no uncontrolled insight into technologies is carried out by non-authorized persons," he said.

According to sources familiar with the subject, the Ministry of Defence and KKR have already agreed on a security accord.

Müller expects a fruitful cooperation with the German federal government, since many products are seen as essential for Germany`s defense sector. "We get much support, also in development," he noted.

Foreign Growth

Unsurprisingly, Müller is eyeing the rest of Europe for potential growth. But the company is looking further abroad for opportunities in both Asia and the US.

"I believe that KKR can greatly help us with its American base as a major financial investor and its networks in the United States," he said.

EBS` radars are already employed on American Littoral Combat Ships, produced by Lockheed Martin, while the company's sophisticated Sferion helicopter assistance system is currently being marketed to various branches of the US Armed Forces.

Furthermore, the company is optimistic that its optronics masts once again will be selected for US nuclear submarines. In the past, EBS supplied periscopes for the Virginia-class subs.

"Our masts are significantly more powerful than those of the competition," Müller said.

Meanwhile, the Pacific will becoming "an important market for us as a whole," the CEO said.

In particular, India, Korea, Japan, Malaysia, Thailand and Singapore offer various opportunities for the firm, and EBS is open for partnerships with companies and research departments in the region.

"We want to cooperate internationally in future with universities and research institutions", Müller said.

It is a strategy that has worked well locally. According to the company it already cooperates with European universities and research institutes in Germany, Austria, Poland, France, Britain, Italy and Greece. Through such cooperation, products should be further improve or designed specifically for local markets.

EBS` growth will not only be organic, but also through acquisitions. Müller expects that after 10 to 15 years of stagnation in the defense sector, new companies will emerge – some of them probably initially focused on civilian products. As an example, he named the manufacturers of civilian drones and the IT sector. These companies could be takeover targets, as well as competitors.

"I think that we have to be vigilant as a classic defense industry company, that we are not being challenged by companies that we don't have on the radar screen," he said.

Despite the name change, the new Hensoldt will not be fully shedding its Airbus past. The Airbus group will continue to hold a 25.1 percent share in the company, which ensures that EBS is considered as a company associated with Airbus after the official spin-off and renaming.

Thus, it is guaranteed that IT and infrastructure shared with the Airbus parent will not be cut off, allowing a smooth transition for the company.

Still, Hensoldt plans for a physical separation, perhaps with a new building in Munich, although the details of separating from Airbus production sites in Friedrichshafen and Ulm have not been elaborated on.

"The Airbus group is, of course, our largest customer. But it stands for less than 20 percent of our business," Müller said, who added that a security agreement is currently being negotiated with the French government, as EBS has manufacturing facility for crypto technology in France. The concern of the French client that such technology could drain to the United States, has to be tackled.

Overall, Müller expresses optimism about the separation from Airbus, saying a break from the "administrative barriers of a major corporation" helps to create "a lot of new energy that we can operate in medium-sized structures."

Positive prospects for future growth of the company also translate into new chances for staff and management, he said, emphasizing that no jobs will be outsourced abroad.

"The new situation creates much momentum," Müller stressed, saying he views his firm's future as "a challenger of other companies," both local and abroad.